We use anonymised transaction and bank data from France to document the evolution of consumption and savings dynamics since the onset of the pandemic. We find that consumption has dropped very severely during the nation-wide lockdown but experienced a strong and steady rebound during the Summer, before faltering in late September. This drop in consumption was met with a significant increase in aggregate households' net financial wealth. This excess savings is extremely heterogenous across the income distribution: 50% of excess wealth accrued to the top decile. Households in the bottom decile of the income distribution experienced a severe decrease in consumption, a decrease in savings and an increase in debt. We estimate marginal propensities to consume and show that their magnitude is large, especially at the bottom of the income and liquidity distributions.
Bounie, D, Y Camara, E Fize, J Galbraith, C Landais, C Lavest, T Pazem and B Savatier (2020), ‘Consumption Dynamics in the COVID Crisis: Real Time Insights from French Transaction & Bank Data‘, COVID Economics 59, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-59#392514_392935_391057
Prospective economic developments depend on the behavior of consumer spending. A key question is whether private expenditures recover once social distancing restrictions are lifted or whether the COVID-19 crisis has a sustained impact on consumer confidence, preferences, and, hence, spending. Changes in consumer behavior may not be temporary, as they may reflect long-term changes in attitudes arising from the COVID-19 experience. This paper uses data from a representative consumer survey in five European countries conducted in summer 2020, after the release of the first waveâ€™s lockdown restrictions. We document the underlying reasons for householdsâ€™ reduction in consumption in five key sectors: tourism, hospitality, services, retail, and public transports. We identify a large confidence shock in the Southern European countries and a permanent shift in consumer preferences in the Northern European countries. Our results suggest that horizontal fiscal support to all firms risks creating zombie firms and would hinder necessary structural changes to the economy.
Hodbod, A, C Hommes, S Huber and I Salle (2020), ‘Is COVID-19 a consumption game changer? Evidence from a large-scale multi-country survey‘, COVID Economics 59, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-59#392514_392935_390673
We use the Paycheck Protection Program (PPP), a central piece of the 2020 CARES Act, as a laboratory to separate between favoritism and informational advantages in lending relationships. The PPP mutes information frictions because loans are fully guaranteed by the government and banks need not screen borrowers. We find that firms with prior lending relationships or personal connections to bank executives are more likely to obtain PPP loans. These effects lead to allocative distortions that force connected firms to return their loans. Consistent with favoritism, the role of connections is weaker when the likelihood of detection is higher.
Duchin, R, X Martin, R Michaely and I Wang (2020), ‘Concierge Treatment from Banks: Evidence from the Paycheck Protection Program‘, COVID Economics 59, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-59#392514_392935_390674
We identify the effects of social distancing policy on reducing the transmission of the COVID-19 spread. We build a model that measures the relative frequency and geographic distribution of COVID-19 infections and provides hypothetical infection distribution in the counties that enacted social distancing policy. We apply the model to a panel of daily COVID-19 infection cases of all counties in the United States and find social distancing lowered the average daily infection cases by 12%. We further provide evidence that the effects are heterogeneous in an individual's income, race, education, and political belief.
Huang, D (2020), ‘How Effective Is Social Distancing?‘, COVID Economics 59, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-59#392514_392935_390675